Section 1026.42 of Regulation Z requires valuation independence in any open or closed-end consumer credit transaction secured by the borrower’s principal residence. The purpose behind this is to …ensure that real estate appraisals used to support creditors’ underwriting decisions are based on the appraiser’s independent professional judgment, free of any influence or pressure that may be exerted by parties that have an interest in the transaction. In other words, a financial institution cannot influence someone (internal or external) to ensure an appraisal or valuation comes back at a certain amount. There also can’t be any conflicts of interest, for example, where someone might have a direct or indirect interest in the property or the transaction itself. While there is a safe harbor, it depends on your institution’s asset size.
Jerod explains more in the video.
Published
2024/06/13